For more information about Vanguard funds or Vanguard ETFs, visit advisors.vanguard.com or call 800-997-2798 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

Investments in bond funds are subject to interest rate, credit, and inflation risk.

Diversification does not ensure a profit or protect against a loss.

Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.

All investing is subject to risk, including possible loss of principal.

As someone who has worked closely with Jack Bogle for more than 30 years, I’ve gotten a kick out of seeing his ideas—and Jack himself—receive recognition that seemed so unlikely when he first began his “eccentric” campaign for index fund investing in the 1970s. So over the weekend, when I saw kind words about Jack from none other than Warren Buffett, I was reminded once again that Jack has proven all the naysayers wrong, persevering through everything from industry criticism to a heart transplant.

In the investing world, there is arguably no shareholder letter more widely anticipated than the one from Buffett’s Berkshire Hathaway. Typically released every February, Buffett is candid—even blunt—about how his firm performed, going division by division in great detail. He also doesn’t shy away from speaking up about industry trends and whether these trends are serving investors well.

A tip of the cap to Vanguard’s founder

In this year’s letter, Buffett singles out the long-term positives of low-cost investing, and the role Vanguard’s founder has played in making low-cost investing so widely available. “If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle,” he writes.

He goes on to add that in the early years Jack was “frequently mocked by the investment-management industry” for urging investors to place their money in low-cost index funds. And now Jack has the “satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned.”

When it comes to Vanguard’s low-cost investing, Buffett has put his money where his mouth is, as part of a $1 million bet. The legendary investor wagered with a New York investment firm that the Admiral™ Shares of Vanguard 500 Index Fund would outperform a collection of more expensive hedge funds over a ten-year period starting January 1, 2008. Buffett and the firm each put up $500,000. The winner will donate the money to charity.

Buffett reports in his latest letter that, as of the end of 2016, his bet on the index fund is winning by a wide margin. If he does win, the money will go to Girls Inc. of Omaha.

Without the drag of high fees, active management can succeed

The well-deserved praise for index fund investing shouldn’t be read as a dismissal of the merits of active investing, however.

After all, if anyone knows that it’s not impossible to outrace the market, it’s Warren Buffett. Indeed, in the same letter Buffett writes, “There are, of course, some skilled individuals who are highly likely to outperform the S&P over long stretches.”

In the end, he adds, what usually does these managers in are high fees. And that is a point Jack has been making for decades.

All investing is subject to risk, including the possible loss of the money you invest. Past performance is not a guarantee of future results.

Bill McNabb

F. William McNabb III is chairman and chief executive officer of Vanguard. Mr. McNabb joined Vanguard in 1986, became chief executive officer in 2008, and chairman of the board of directors and the board of trustees in 2010. Previously, he led each of Vanguard’s client-facing business divisions. Mr. McNabb is active in the investment management industry and serves as the chairman of the Investment Company Institute. He also serves as chairman of the board of directors of the Zoological Society of Philadelphia and on the board of the United Way of Greater Philadelphia and Southern New Jersey, the Wharton Leadership Advisory Board, and the Dartmouth Athletics Advisory Board. Mr. McNabb earned an A.B. at Dartmouth College and an M.B.A. at The Wharton School of the University of Pennsylvania.

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For more information about Vanguard funds or Vanguard ETFs, visit advisors.vanguard.com or call 800-997-2798 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

Investments in bond funds are subject to interest rate, credit, and inflation risk.

Diversification does not ensure a profit or protect against a loss.

Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.

All investing is subject to risk, including possible loss of principal.

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